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Introduction

Cross Category Trends

DISRUPTION, DISINTERMEDIATION, AND DIFFERENTIATION

Amazon Effect

Brands encounter new challengers

New brands, or non-brands, often from Asia, challenged established brands. Depending on the category—usually apparel, luxury, or personal care—these brands offered good quality, on-trend style or ingredients, and competitive prices. They often appeared on Amazon and benefited from the “Amazon Effect,” low cost-of-entry, wide reach, and instant credibility because of peer reviews and the strength of the Amazon brand. At the same time, Amazon leveraged its credibility, introducing its own-brand apparel and extending its reach deeper into grocery and other categories.

Artificial Intelligence

AI moves from idea to everyday reality

Brands increasingly used artificial intelligence (AI) to improve products, service, and differentiation. IBM expanded its use of Watson in healthcare and other industries. Car and technology brands relied on AI in their development of autonomous cars. Using AI, Amazon refined its Dash program for automatic replenishment. When launched two years ago, Dash enabled customers to reorder certain commodity items with the touch of a button. More recently, certain manufacturers produced products, such as ink cartridges, that anticipate the need for replenishment and order automatically. Automatic replenishment also shifted to a new level with voice.

Voice

Convenience grows but choice narrows

Home assistants powered by AI became household names: Siri (Apple), Alexa (Amazon), Bigsby (Samsung), Cortana (Microsoft), and Google Assistant. In the most benevolent interpretation of this phenomenon, these disembodied voices made life easier, creating shopping lists, providing weather reports, and answering miscellaneous questions. In the more dystopic view, these assistants are the gateway drug to a deeper, dictatorial role in people’s lives. Voice compounded the challenge for brands to be in the consideration set, so that choice is not based on an algorithm or paid search. And brands became more aware of the need to develop voice as a brand asset.

Privacy and Trust

Sharing personal data sparks more concern

Ambivalent consumers invited personal assistants into their homes, while they also became more skeptical and ambivalent about trusting brands to protect their data. Consumers seemed willing to accept the quid pro quo exchange of personal data for convenience and the useful, seemingly indispensable, products and services of social media, e-commerce, and search brands. The Facebook privacy breach captured their attention, however, because of the size of the breach, with the data over 90 million people affected, and also because it seemed as if the fundamental transaction—personal data for free products and services—was flawed or at least needed more explicit rules. Search and social media brands faced criticism for not sufficiently managing data and algorithms, which resulted in ads run adjacent to questionable content.

Fintech and Blockchain

Emerging tech portends category transformation

Financial services categories, both banks and insurance, enjoyed healthy increases in value this year because the brands did many things right and also benefitted from a strong global economy and growth in Asia. Fintechs competed for payment processing and transactional functions usually performed by traditional banks. They carved away transactional business and diverted young people, potential customer of the large financial brands. In certain markets, like the UK, online aggregators offered insurance products, mostly with price-driven messages. And portending great potential change was blockchain technology—systems of elaborate networks of transactions that promised to ensure trust with total transparency rather than mediation.

Customer Experience and AR

Brand experience builds difference

Leading brands, such as Apple and Amazon continued to raise the bar on expectations for customer experience at every customer touch point—both online and offline—from trial to pick-up or delivery. And brands used more tools, such as augmented reality(AR), to improve the experience. AR software contained on smart phones made it easier for brands to develop relevant AR apps and for consumers to use them. People could shop at a Home Depot, Lowe’s, or Ikea and view how a particular item of furniture would look in an actual room in their house. Customer experience become an even more important driver of differentiation. The challenge for brands was not just to use tools like AR, but to find new, creative, and different ways to use them.

Brand Implications

Disintermediation threatened brands, but also made them potentially more important. The disintermediation by Amazon replenishment requires brands to find new—or old—ways to build awareness so that consumers, not algorithms, make important choices. When consumers are online choosing among many similar brands, as sometimes happens in insurance, the most well-known or differentiated brands has an advantage. The rise of online brands, such as personal care products, often from Asia, present a threat, but also an opportunity for major brands to better understand consumer needs, based on the products they are selecting and the conversations they are having. With these insights, brands can appeal to consumers with a promise quality and trustworthiness. It can be useful to partner with upstart brands, rather than acquire them, and learn from their entrepreneurial cultures.

COMFORT, CONVENIENCE, AND COMPROMISE

Authenticity

Ideal meets real across categories

People reconciled the ideal individual they aspired to be (eating healthy foods and being environmentally conscious) and the person they lived everyday (mostly eating healthy and usually being environmentally conscious). They accepted authenticity—over perfection—in themselves and their brands. The fast food category rebounded. McDonald’s and Burger King rose in value, in part because of their menu and operational changes, but also because of the changed mentality of the customers. Healthy eating wasn’t just about higher intake of vegetables and salad. It was possible to enjoy a burger—probably made from fresh, even locally sourced beef.

Comfort and Convenience

Brands capture Consumer mood

Boldness and color characterized apparel and luxury products, as consumers indulged a need for escape and fun because the news was incessantly depressing. They shared this ethos on social media, with photos of comfort food and comfortable streetwear. Delivery with Uber Eats, Grub Hub, Amazon Delivery, and other brands enabled a further indulgence—convenience. Anticipating the demise of the combustion engine, carmakers continued to develop mobility options that included subscription programs and investments in electric and autonomous vehicles. But consumers chose the comfort and convenience of cars, especially big cars, making SUVs the best-selling vehicles worldwide.

Brand Implications

Burgers and big cars were back, but in a back-to-the-future way, no longer as symbols of conspicuous consumption. Rather, consumers and brands accepted the gap between individual need and desire, and what was best for personal or societal wellbeing. Brands understood this tension and, judging by social media posts of fast food photos, some consumers accepted it with self-conscious irony.

CATEGORY TRANSFORMATION

From telecom providers to content brands

Standing still was not an option for telecom providers. A business model depending on voice and data transmission became increasingly unsustainable, as Over-the-Top (OTT) providers sent voice and data over the internet, driving down prices, commoditizing the business, and eroding profits. The telecom providers continued efforts to become branded providers of content. Following on its acquisition of DirecTV, AT&T attempted to acquire Time Warner, which would make it the owner of content leaders such as HBO, CNN, and Warner Brothers. Verizon pursued leadership in Smart Cities. For these brands the solution to being squeezed in a slow-growth category was to tear down the category walls.

Brand Implications

Tearing down the walls of the category expands the competitive set and exposes brands to new threats and opportunities. Moving into content brings telecom providers into head-to-head competition with brands like Disney or Netflix, No. 19 and No. 61, respectively in the BrandZÔ Global Top 100. AT&T is No. 10 in the BrandZÔ Global Top 100. Verizon is No. 12. As they develop IoT businesses, these brands increasingly will face the BrandZÔ Global Top 4 brands: Google, Apple, Amazon, and Microsoft, and No. 11 IBM. Plus, being in a highly regulated industry, the fate of the telecom provider brands is not entirely in their hands. The US government is challenging AT&T’s plans to acquire Time Warner.

From oil and gas companies to energy brands

The oil and gas category struggled against time. The world’s consumption of carbon fuel is expected to peak in around 2035 and then decline. That is a short period time for industrial companies that regularly place big financial bets on asset-intensive, long-term, deep-water drilling projects. The major integrated companies shifted their focus to gas, to serve the world’s immediate energy needs with a cleaner energy option, and they investigated alternative energies. Ultimately, these brands will continue to shift from oil and gas companies to energy brands.

Brand Implications

During this transition period, brand is likely to become more important for several reasons: (1) Downstream, consumer-facing retail business will become a more necessary revenue source; and, (2) Exploration, at least in the US, will take place closer to consumers who will have a louder voice in approving licenses to operate.

From carmakers to mobility brands

The end of carbon and the combustion engine ultimately will define the future for carmakers. That was about the only certainty, as car brands strove to meet immediate consumer needs while preparing for a future that was not binary—cars or mobility—but rather some still-unknown combination. Adding to the complexity, was the disconnect between the cars consumers desired, SUVs, and lower-emission cars needed to protect the planet.

Brand Implications

Most car brands deliver a combination of benefits: utility (Getting from Point A to Point B) and experience (enjoying the driving journey from Point A to Point B). Prospective mobility solutions will need to deliver combinations of both benefits.

From cola drinks to soft drinks brands

Coke and Pepsi share the same challenge. Their established fans love the soda but drink it less. New fans are hard to acquire because health concerns dissuade young people from sampling the drinks. Both Coca-Cola and PepsiCo are pursing variations on a similar strategy: promote and leverage the master brand as an umbrella protecting new brand shoots. Coca-Cola promises a drink for everyone, and PespiCo offers drinks and snack food. Neither is reinventing a category, but they are stretching it, particularly with healthier alternatives like waters and teas. Similar to the car brands, the soft drink brands face the challenge of understanding and satisfying the contradictory sentiments of human beings. We profess to want healthier ingredients, but often drink beverages with sugar or artificial ingredients, similar to the way we want a healthier environment, but often drive carbon-burning SKUs.

Brand Implications

The soft drinks market is moving to healthier consumption, primarily for two reasons: the preferences and concerns of younger people; and the rapidly changing regulatory environment promulgated by their parents’ generation. As cola consumption continues to decline, the brands have one major strength—their powerful brand equity. The consumer’s predisposition to select the brand provides time to evolve the business.

From retail to “New Retail” brand ecosystems…

The term New Retail, devised by Alibaba CEO Jack Ma, describes how the interaction of buyer and seller has evolved into a complex integration of data-enriched online and offline networks linked with sophisticated logistics that together form an ecosystem in which the retailer can anticipate the customer’s needs and fulfill them quickly, accurately, and consistently with pick-up or delivery options. The largest mass retailers best illustrated this integration. The e-commerce giants Alibaba, JD.com, and Amazon acquired chains of physical stores. Walmart, with over 11,000 stores worldwide, acquired an e-commerce retailer and dropped the word stores from its name.

Brand Implications

With the seamless integration of online and offline, retailers have greater insight into the shopping behavior anywhere along the circuitous path to purchase. This phenomenon challenges product brands that usually have less detailed shopper data. Opportunities to engage with customers should appear as retail evolves and stores become smaller, more experiential, and sometimes pop-ups. Brands need to find these opportunities for face-to-face consumer engagement.